Emerald Bay Bidder Sues

Wednesday, 22 July 2009 00:00
Lisa Wells

U.S.-based Mountain Lake Development Company (MLDC) has filed a $3 million lawsuit against Japan-based Mitsui Corporation and PriceWaterhouse Coopers (PWC) along with several other parties, claiming that the companies have refused to refund the money that was held in escrow as a deposit when it was in the running to buy the Emerald Bay development in Exuma a few months ago.

Russell Downs, a U.K. based accountant, has been acting on behalf of the property's receiver (PWC). Mitsui is the secured lender.

Downs, who works for PriceWaterhouse Coopers, and has been overseeing the sale of Emerald Bay, told Guardian Business yesterday that now that the property has found a new buyer, it is "highly unlikely to get derailed by any piece of litigation."

Downs, who said he was not aware that a lawsuit had been filed, admitted that there was an ongoing dispute with MLDC, but said it was not relevant to the current sale process.

"The positive for The Bahamas is that the receivers and Mitsui have now reached agreement with a party for the sale. We are going to work with the government to make sure the necessary consent is received and that's our priority," he said.

Downs added that the resort has "sold for a lot less than we thought we might have gotten 18 months or so ago when we began this process."

"The important thing is that this will allow Mitsui to achieve its objective, which is to exit its position on the resort," Downs said.

"To the extent that there is a dispute with one of the former potential purchasers, well that's just something that we'll have to deal with. The best place for that to be heard is in the courts and not the streets of Nassau."

Bahamian law firm McKinney, Bancroft and Hughes filed suit on behalf of MLDC principal, Dr. Ed Ghandour, in The Bahamas' Supreme Court on July 9.

In court documents, Ghandour claims that he forwarded two separate payments of $1.5 million to the law firm Lockhart and Munroe in February to be held on behalf of Aero General Aviation Ltd. (AERO), a Bahamian company owned by U.S. principals.

Ghandour claims that he was working in conjunction with AERO to purchase the property from Mitsui Corporation, and was required to put up the $1.5 million in order to begin the process of purchasing the resort.

Ghandour claims that the second part of the deposit was made pursuant to an asset sale agreement (ASA) that AERO entered into with Mitsui, also in February.

The ASA reportedly required the additional $1.5 million following the submission of applications by Mitsui to obtain the approval of The Bahamas Investment Authority (BIA) for the sale.

Ghandour alleges that the ASA was conditional upon the approval of the sale by the BIA on or before March 31, 2009. He said that he believed that to be a realistic proposition because several people involved in the sale process told him that Prime Minister Hubert Ingraham could expedite the sale process within days if he so chose.

However, Ghandour said that when he met with Ingraham and BIA Director of Investments Joy Jibrilu in March, Jibrilu informed him that the approval process routinely takes three to six months and she did not believe that it was possible that the sale could be approved by the end of that month.

Ghandour claims that on March 31 (the closing date for the ASA), MLDC and AERO sent a letter to the receiver's lawyers noting that it was unlikely the closing date would be met.

He also claims to have sent a letter to Lockhart and Munroe on the same day requesting the return of the $3 million deposit.

In an affidavit, Ghandour said that the receiver's Bahamian attorneys at Lennox, Patton and Co. objected to the return of the deposit by written letter on April 2.

Ghandour said he was later informed that Mitsui had proposed "somewhat ambiguously" that the deposit could be returned "provided they were reimbursed for certain of their transaction costs."

In addition to claiming that several people involved in the Emerald Bay sale misrepresented the BIA approvals process, Ghandour alleges that the receiver failed to give accurate information about Emerald Bay's financial status in a timely and transparent manner.

He said the receiver also misrepresented the costs involved in renovating the hotel property at Emerald Bay, operated by the Four Seasons resort at the time.

"[The] Four Seasons was indicating that the buyer of the property would have to expend over $80 million to upgrade and renovate the resort. Previously, it had been represented that this cost would be around $22 million," the affidavit read.

Ghandour also said that he believes several Mitsui executives were angling to have the deal approved by March 31 in order to receive bonuses.